Today we have submitted our response to Ofgem’s consultation on consumer outcomes as they relate to billing.
Ofgem is moving towards a more outcomes-based approach to regulation, meaning it will be clearer about the outcomes it expects suppliers to achieve while being less prescriptive about how they deliver them. This consultation is the first step in Ofgem’s phased approach to implementing seven consumer outcomes, the first one being “Consumers receive accurate, timely, accessible and understandable energy bills.”
Last month, we sat down with our lived experience panel to hear about their experiences of energy billing. Their feedback suggested there is still a long way to go before energy bills are consistently clear and understandable.
Overall, participants described energy bills as opaque and overly complex, contributing to anxiety, disengagement and low levels of trust.
In this blog, we will look at some of the key themes that emerged from conversations with our panel.
Energy bills are hard to understand, although some formats work better than others
A number of participants said they only looked at the amount owed. Formats that minimised clutter and highlighted key information were preferred. Some people found terms debit and credit confusing in relation to understanding whether they owed money or not, and some mentioned that they found the inclusion of VAT an unnecessary complication. The general consensus was that bills were difficult to understand, particularly for people with dyslexia, autism or lower literacy levels. On the other hand, some panel members reported a positive experience of using energy supplier apps.
“Needs to be clearer about what you are being charged, why and what you’ve paid and be really clear. Confusion about debit and credit as opposite to a credit card where you build debt, but it is called a credit card.”
“To be honest, I don’t even look at all the ‘blah-de-blah’ I don’t read it I just go straight to how much I owe.”
“Need more accountability to explain standing charges and exit fees – so that even if they are reasonable people understand why they are there.”
“Hard to know how to challenge your bill as they’re so complex.”
Billing and communication practices can increase financial stress
Participants were clear that when you are on a low-income, receiving a bill which is difficult to understand can really add to your stress levels. And payment methods can worsen financial strain or reduce flexibility.
“Make all documents easy to read with no jargon. When already affected by food poverty, fuel poverty etc., don’t have time to call them up and ask them to explain my bill and leaves me feeling upset and like there is deliberate confusion.”
“Been put on monthly even though asked to be put on pay as you go as they changed the meter and we are now in debt, they won’t change it back until we pay off the debt, which we cannot afford.”
“Was encouraged to pay more to pay off arrears as they ‘match’ this from a fund but arrears have remained the same.”
Low trust and perceptions of unfairness
Panel members told us that because bills are hard to understand it’s difficult to know if you are being charged the right amount. This creates a feeling that suppliers can “charge anything” without clear justification. In particular, participants expressed concerns about standing charges, suppliers holding credit balances, and unexpected cost increases after switching.
“No trust that it is a fair reflection of what I have been using and a fair charge.”
“They also don’t tell you what credit you can have back as why should they get to hold onto it and collect interest. They should be able to pay it back automatically.”
“Felt that standing charge varies – looked cheaper on some bills than others and how is that a thing. Yes you’re paying for infrastructure, but they’re making a huge profit.”
Poor customer service and support
Panel members’ experiences of supplier customer service suggested staff were often perceived as unsympathetic, undertrained and focused on debt collection rather than support.
Participants also reported uncertainty about the benefits of the Priority Services Register and concerns that accessibility needs were not always acted upon.
“The staff are not customer service orientated, their job is to collect as much money as possible, not to be sensitive to people’s needs and they don’t have the power to do anything any way and assume everyone is giving them a sob story and assume at least half of people are lying.”
“The customer service are too robotic and don’t have enough training they’re just trying to get off of the phone and get on to the next customer.”
“I got put on the priority register because I thought it would be helpful, but because of that they tried really hard to move me from pay as you go to direct debit, it would of been a disaster as I rely on charity fuel vouchers (you can’t use these on DD) told them had a severe mental health problem and response was we all have mental health problems mate…. It was awful.”
Switching and market concerns
Panel members expressed uncertainty about the benefits of switching. There was a perception that switching suppliers might initially appear beneficial but might lead to higher costs later. Some participants felt that price comparison tools could be misleading due to reliance on estimates rather than actual consumption. Panel members also raised questions about bundled deals and what the consequences might be if you missed a payment.
“When switched, always looked like it will get better, but then after 3-8 months it just gets more expensive and there don’t seem to be as much consumer driven information on price comparison websites too.”
“As all based on estimates they make it look better than what you actually use and then your bill ends up being much higher.”
“On some bills it tells you what you can save if you switch to a different deal (but in this instance it was only available if you switched more things to them e.g. mobile phone insurance (bundle) etc…). Ethically questionable – if you miss your bill, then your insurance is void too. If someone bundles things with one provider it increases their risk to one company, which they may not want.”
The Panel session demonstrated once again why inclusive design is key for both regulators and suppliers of essential services like energy – a point we emphasised in our consultation response.
So will more outcomes-based regulation lead to better energy bills?
At Fair By Design we are concerned about whether now is the right time to remove prescriptive rules. We believe a core set of standards that all energy suppliers must follow remains essential for maintaining and building consumer trust. It is also much easier to communicate to consumers, as well as to advisors what they can expect from suppliers, and for the Ombudsman to judge whether the supplier has done what was expected of them. We are calling on Ofgem to work with us and other consumer groups to identify what those minimum standards should be, alongside introducing clear consumer outcomes.
Our work on standard credit has shown us that even when suppliers are incentivised to act in a way that should lead to good consumer outcomes, this does not always happen. Suppliers are obliged under their licence conditions, and would actually make money, by encouraging consumers to move off standard credit (where consumers pay for their energy when they receive a bill) and onto direct debit. However, Ofgem’s own research as well as our own shows that less than half of people who pay by standard credit, understand that they are paying a premium to do so. And our own recent analysis of energy bills, shows that the standard credit premium is not always clearly explained meaning that consumers cannot make an informed choice about their payment method. This suggests we need to be sceptical about whether setting an outcome will automatically lead to the outcome being achieved.
However, a key factor is how much any regulation is monitored, evaluated and enforced. And here we warmly welcome Ofgem’s commitment to be more proactive and to work closely with suppliers. The 3-year investigation into British Gas forced installation of pre-payment meters represents the worst of all worlds – not preventing harm at an early stage and then a protracted process to address the harm caused.
You can read our full response to Ofgem’s consumer outcomes consultation here.
By Maria Booker, Head of Policy, Fair By Design
